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Investing.com -- S&P Global Ratings has revised its outlook for Xcel Energy Inc. and most of its subsidiaries to stable from negative, while affirming their credit ratings following settlement agreements related to wildfire claims.
The rating agency views Xcel’s decision to settle Marshall fire claims before upcoming trials as "prudent" and demonstrating "highly effective risk management." The company is taking a one-time $290 million charge to earnings, net of insurance coverage, which significantly reduces its financial exposure.
The Colorado state insurance commission had previously estimated the total economic loss from the Marshall wildfire to exceed $2 billion, with potential for additional noneconomic and punitive damages.
S&P expects Xcel and its subsidiary Southwestern Public Service Company (SPS) to continue settling Smokehouse Creek fire claims. During its second-quarter 2025 earnings call, Xcel announced a $290 million liability accrual for estimated wildfire costs related to Texas panhandle wildfires, representing the lower end of its estimable range.
The company has approximately $200 million in insurance coverage remaining under its $500 million 2024 policy and has already settled or dismissed 11 of 27 lawsuits. S&P’s base case assumes Xcel will resolve all Smokehouse Creek and Texas panhandle wildfire litigation below its insurance coverage limit.
Wildfire mitigation represents about 10% of Xcel’s $45 billion capital spending plan for 2025-2029. Public Service Co. of Colorado recently received approval for its fourth wildfire mitigation plan, incorporating $1.9 billion in capital spending through 2029. Similarly, SPS is seeking authorization for a $490 million system resiliency plan in Texas.
S&P continues to assess Xcel’s financial risk profile as significant. The agency expects the company’s consolidated capital spending to increase to $11 billion in 2025 from $7.3 billion in 2024, with modest decreases to $9.84 billion in 2026 and $8.75 billion in 2027.
Despite the one-time charge and significant capital spending, S&P forecasts Xcel’s consolidated funds from operations (FFO) to debt will remain between 14%-16% through 2027, placing it at the lower end of its financial risk profile category.
The stable outlook reflects the substantial reduction in legal risks from the Marshall fire and continued progress in reducing legal risks related to the Smokehouse Creek fire. S&P could lower its ratings if Xcel’s subsidiaries cause another significant wildfire, if regulatory risk management deteriorates, or if FFO to debt consistently falls below 13%.
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